## Facts

- Parklane Hosiery Co. and related officers, directors, and stockholders issued a proxy statement in connection with a merger.
- A shareholder, Leo M. Shore, filed a federal class action seeking damages and other relief, alleging the proxy statement was materially false and misleading under federal securities law and SEC rules.
- Before Shore’s action went to trial, the SEC sued the same defendants in federal district court, alleging the proxy statement was materially false and misleading in essentially the same respects.
- After a nonjury trial in the SEC action, the district court entered judgment for the SEC, finding the proxy statement materially false and misleading; the court of appeals affirmed.
- Shore then sought partial summary judgment in his damages action, arguing the SEC judgment precluded Parklane from relitigating falsity and materiality.

## Issues

1. Whether a private plaintiff may use offensive nonmutual collateral estoppel to preclude a defendant from relitigating factual issues previously decided against the defendant in a prior nonjury equitable action brought by a different plaintiff.
2. Whether applying offensive nonmutual collateral estoppel in these circumstances violates the defendant’s Seventh Amendment right to a jury trial.

## Decision

- The Supreme Court affirmed the court of appeals.
- Offensive nonmutual collateral estoppel may be permitted, subject to the trial court’s discretion and fairness limits.
- Parklane was precluded from relitigating whether the proxy statement was materially false and misleading because it had a full and fair opportunity to litigate those issues in the SEC action.
- Applying issue preclusion from a prior nonjury proceeding did not violate the Seventh Amendment.

## Legal Principles

- Mutuality is not required for issue preclusion; a new plaintiff may, in appropriate circumstances, invoke collateral estoppel against a defendant who previously litigated and lost the same issue.
- Offensive nonmutual collateral estoppel is not automatic; trial courts have broad discretion to deny it when its use would be unfair.
- Fairness factors include whether the plaintiff could have joined the earlier action, whether the defendant had a full and fair opportunity and sufficient incentive to litigate, whether the prior judgment conflicts with other judgments, and whether the later action offers procedural opportunities unavailable in the first that could affect the outcome.
- The Seventh Amendment preserves a jury trial right only for factual issues not already fully and fairly adjudicated; it does not require a jury redetermination of issues conclusively decided in prior proceedings.

## Conclusion

The Court held that a private plaintiff may, in the trial court’s discretion and consistent with fairness, use offensive nonmutual collateral estoppel based on issues decided in a prior SEC nonjury action, and that doing so does not infringe the defendant’s Seventh Amendment jury trial right when the defendant previously had a full and fair opportunity to litigate.


Parklane Hosiery Co. v. Shore, 439 U.S. 322 (1979)